Entrepreneur Foreign Study Experience and Firm Innovation: Institutions and Resources

Abstract

Research in the international business and social psychology literature has explicitly or implicitly adopted the intellectual capital or developmental perspective and demonstrated a positive relationship between entrepreneur foreign study experience and creativity and innovation. In a departure, we argue that entrepreneur foreign study experience does not necessarily benefit firm innovation. Adopting institutional and resource substitution perspectives, we examine conditions under which the positive relationship found in prior research may or may not hold. We argue that institutional forces condition the extent to which intellectual capital associated with foreign study experience benefits innovation, while resources via local connections and political participation substitute such intellectual capital. Using a unique large dataset of private firm entrepreneurs in China, we found that returnee entrepreneur participation in political system, membership in communist party, and firm Guanxi orientation weakened the positive effect of foreign study experience on firm innovation. Contrary to our prediction, local government support for private business attenuated rather than strengthened the relationship.